Wednesday, 27 May 2009

USD Regains Value Against the Majors

The U.S Consumer Confidence report which was released yesterday, gave a surprisingly positive result, suggesting that the public is retaining its faith in the North-American economy. In today's trading, traders should pay special attention to the Existing Home Sales indicator scheduled for 14:00 GMT, as another positive figure could further strengthen the USD.

Economic News

USD - Dollar Pairs Gains On Positive Consumer Confidence

The greenback advanced versus all of its major counterparts as signs of improving consumer confidence in the United States combined with worries about Germany's banks hurt the European currency after a rally last week. The Conference Board's U.S. consumer confidence index rose in May to 54.9 from an upwardly revised 40.8 in April. The U.S currency strengthened after a media report questioning the health of the German banking system prompted traders to trim back bets against the Dollar.

In trading just before midday in New York, the Dollar was up 0.2% versus the EUR to $1.3893, after touching a session low of $1.3859. The Dollar also rose against the Japanese Yen, trading at 95.10 Yen compared with 94.77 Yen late Friday. But after the release of the U.S. confidence numbers, the EUR also regained some ground against the Dollar, and was at $1.3984 in late New York trade.

The Dollar traded at 5 month lows last week, pushed lower in part by concerns that soaring deficits may threaten the United States' 'AAA' sovereign debt rating. However, the Dollar would likely hold its value even if the U.S. lost its AAA credit rating, because demand for government securities among foreign central banks is unlikely to wane, according to analysts.

Another round of important economic data from U.S is ahead, the Existing Home Sales. The indicator will be published on Wednesday at 14:00 GMT, and is expected to rise from 4.57 million to 4.65 million. A good figure could help the Dollar with retracting its last month's falls against the EUR.

EUR - EUR Hit by Concerns over German banking sector

The European currency depreciated for the first time in 7 days, eroding advances that pushed it last week to the highest level in 4 months. The 16-nation currency fell against the Dollar on speculation last week's gain was too large to sustain, reducing the currency's appeal. The EUR dropped 0.2% to $1.3982 from $1.4017 yesterday. It touched $1.4051 on May 22, the highest level since Jan. 2. Against the Yen, the EUR traded at 132.87, compared with 132.92 yesterday.

The Euro-Zone currency was hurt by plummeting share prices and weak economic data. A media report questioning the health of the German banking system also prompted traders to cash in on the EUR's recent rally. EUR's depreciation versus the Dollar came after the report over Germany's debt situation. Although not new, the report warned that German banks have bad assets of around 200 billion euros ($280 billion).

However, according to technical analysis the EUR may advance further versus the Dollar after the 50-day moving average rose above the 200- day average for the first time since September. The EUR 50-day moving average, currently at $1.3409, surpassed the 200-day moving average at $1.3385 today. Both are good bullish signals analysts say.

JPY - Yen Down Versus the U.S Dollar

The Japanese yen weakened as U.S. economic reports added to evidence the start of a recovery is near, reducing demand for safety. The JPY fell against 15 of the 16 most-active currencies after data showed U.S. consumer confidence climbed this month to the highest since September.

The JPY held declines against the Dollar after a government report showed the world's second-largest economy unexpectedly posted a trade surplus in April. The Yen bought 95.36 versus the dollar from 95.03. The Yen declined to 133.34 per EUR from 132.90 yesterday.

Oil - Crude Rallies on U.S Consumer Confidence

Crude Oil prices rose as much as 0.8%, to $62.35 a barrel, its highest settlement in more than 6 months in New York yesterday as U.S. benchmark stock indexes climbed for the first time in 5 sessions. Crude extended its gains after rising yesterday as a report showing a jump in U.S. consumer confidence triggered an advance in equities. The biggest gain in consumer confidence since 2003 spurred optimism the worst of the recession is over in the world's largest oil-consuming nation.

Oil was falling earlier in the session on expectations that the Organization of Petroleum Exporting Countries (OPEC) won't cut production quotas at a Thursday meeting. OPEC raised its oil production in April for the first month since September, as some member countries took advantage of a recent rally in oil prices, data from the International Energy Agency showed.

OPEC, responsible for 40% of global crude supply, is likely to keep output quotas unchanged for a second time this year as recovering oil prices forestall the need for new cuts, according to analysts.

Technical News

EUR/USD

After peaking at the 1.4050 level, the pair has slightly dropped and is currently traded at the 1.3960 level. It appears that a technical correction might take place, as a bearish cross has been formed on the 4-hour chart's Slow Stochastic. Going short could be the right choice today.

GBP/USD

After a few failed attempts to breach through the 1.6000 resistance level, it appears that the bullish momentum has reached its limit. Currently, as all oscillators on the daily chart are pointing down, it appears that a modest bearish movement might take place.

USD/JPY

There is a very distinct bullish channel forming on the 1-hour chart, as the pair is now floating near its upper boarder. The daily chart continues to provide bullish signals as the RSI has left the over-sold area, and is pointing back up. It seems going long could be the preferable choice today.

USD/CHF

The pair has experienced a lot of volatility lately, as a triple doji formation was formed on the daily chart. However, as a bullish cross is taking place at the daily chart's Slow Stochastic, it appears that a bullish correction might be imminent.

The Wild Card

Gold

After over a month of very strong bullish movements, on which an ounce of gold was traded for over $960, it appears that a bearish correction is now taking place. Currently, as the daily chart's RSI has dropped below the 70 line, it seems that the bearish move could extend. This might be a great opportunity for forex traders to join a very popular trend.

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